Category Archives: Taxation

Podcast – Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Published July 9, 2020

Podcast - Who is a Resident Alien Under United States Tax Law? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Who is a Resident Alien Under United States Tax Law?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation, and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Who is a Resident Alien Under United States Tax Law?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “Who is a Resident Alien Under U.S. Tax Law?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

Good morning, Coleman. This is Mayra. I do have a couple of questions for you when it comes to umm… a resident alien under U.S. tax law. Who or what is considered a Resident Alien under U.S. Tax Law?

Attorney Answers Question 1:

  • S. tax law defines the term Alien in the following ways:
    1. Nonresident Alien; and
    2. Resident Alien
  • I am going to go into further details on both; but our main focus in this podcast will be on the Resident Alien. Anyone who is interested to learn more about how a nonresident alien is impacted by U.S. tax law can subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever they get their podcasts.
    1. Nonresident Alien is defined in Internal Revenue Code Section 7701(b)(1)(B) as any individual who is not a citizen of the United States and who do not meet either the Green Card Test or the Substantial Presence Test for Resident Alien.
    2. Internal Revenue Code Section 7701(a)(9) includes only the 50 States and the District of Columbia in determining whether an alien is a nonresident alien. The law does not include U.S. possessions, territories, or U.S. airspace. For example, Guam is not included in making the determination as to whether an alien is a nonresident alien.
    3. I am now going to focus this podcast strictly on the question: Who is a Resident Alien in U.S. Tax law?
    4. There are two test or measures used in U.S. tax law to determine whether an alien is a resident alien under U.S. tax laws as follows:
      • Green Card Test: Under this test an individual is a Resident Alien (should be simply U.S. Resident, but as I mentioned the law still says resident alien, nevertheless) Under the Green Card test an individual is a U.S. resident if the individual was a lawful permanent resident of the United States at any time during the calendar year.
      • An individual is a Green Card Holder if they have become a Lawful Permanent Resident under the immigration laws of the United States 8 United States Code.
      • For U.S. tax purposes lawful permanent residence status continues unless the status is rescinded administratively or rescinded by a U.S. federal Court, such as, in a deportation proceeding by an Immigration Court.
      • An LPR can also abandon their Green Card Status by following the appropriate procedures or any Consular Officer or Border Protection Officer possibly could argue that the LPR status has been abandoned under circumstances described in U.S. Immigration Laws. U.S. tax regulations Section 301.7701(b) sets forth the Internal Revenue Codes positions concerning the Green Card test in determining whether an Alien is a Resident of the United States based on the Green Card test.
  • Now let us turn to the second test used by the IRS in determining whether an alien is a Resident Alien of the United States. The second test is known as the Substantial Presence Test. Under the substantial presence test, an individual is a Resident Alien or U.S. Resident if they are physically present within the United States on at least:
    1. 31 days during the current calendar year; and
    2. a total of 183 days during the current year and the two preceding years, counting each day of physical presence in the current year as one whole day, each day of presence in the first preceding year as one-third of a day., and each day of presence in the second preceding year as one-sixth of a day. Fractional days derived from these computations are not counted towards substantial presence.
  • I know this may sound very complicated to non-tax lawyers or Certified Public Accountants; the Substantial Presence Test is explained in excruciating detail in Internal Revenue Regulation Section 301.7701(b)-1(c)(1). And both the Green Card Test and Substantial Presence Test is codified in 26 United States Code Section 7701.

Interviewer:  Mayra Torres, Public Relations Associate

Question No 2:

I am just curious, are there any exceptions to this Substantial Presence Test. I mean, you are always saying the law is complicated and that there are often exceptions to the rules. What about now… are there any folks exempt from the Substantial Presence Test?

Attorney Answers Question 2:

  • The following individuals are exempt from the Substantial Presence Test pursuant to Internal Revenue Code Section 7701:
    1. International Students
    2. Professional Athletes
    3. Diplomats and their immediate family members
    4. Teachers on the J Visa immigration status and their immediate family members.
    5. Full time Employees of international organizations and their families that have been appropriately designate by the Secretary of the Treasury in consultation with the Secretary of State of the United States.
    6. Regular commuters from Mexico and Canada are not generally considered meeting the substantial presence test.
    7. There might be a few other exceptions; but these are the ones I can recall right now. I might add that even within these exceptions there are further particulars that I am just not going to get into right now.
    8. The actual application of the substantial presence test is very complex, and anyone impacted by these issues should consult with qualified tax professionals in their area.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

Well alright then. What are some of the United States tax consequences to an individual meeting either the Green Card Test or the Substantial Presence Test?

Attorney Answers Question 3:

  1. S. residents who meet either the Green Card Test or the Substantial Presence Test must comply with all U.S. tax laws (I am using this term for resident aliens because I think it sounds more humane and welcoming).
  2. S. residents are generally taxed in the same manner as U.S. citizens. They are taxed on their worldwide income the same as U.S. citizens.
  3. S. residents must report their income by filing the appropriate federal tax return complying with all the reporting requirements applicable to U.S. citizen taxpayers.
  4. S. residents are allowed exclusions from gross income with respect to certain income earned, such as, certain compensation paid by foreign employers, nontaxable dividends, gains from sale of home and other types of income specifically excluded from gross income for U.S. taxation purposes.

Interviewer:  Mayra Torres, Public Relations Associate

Question No. 4

  • S. residents are taxed just like U.S. Citizens pretty much. I get that. But what about that $600 per week people are receiving under the CARES Act?
  • Can resident aliens (foreigners who satisfy the Green Card Test or Substantial Presence Test) receive that $600 per week too? And what about people who don’t have their papers? How and where do resident aliens apply.

Attorney Answers Question 4:

  • Yes, individuals who satisfy the Green Card Test or the Substantial Presence Test can qualify to receive the weekly $600 emergency increase in unemployment compensation benefits under the CARES Act because Subtitle B Section 6428.2020(2)(b)(d) says that nonresident alien individuals do not qualify.
  • Remember I spoke earlier about an alien can be either (1) a nonresident alien or (2) a resident alien for U.S. tax purposes. If an alien satisfies the Green Card test or the Substantial Presence Test they are classified as Resident Aliens (I like to use the term U.S. Resident) for tax purposes. And yes, undocumented individuals can satisfy the Substantial Presence Test and be treated as Resident Aliens for tax purposes. They typically should apply for an Individual Tax Identification Number otherwise called an ITIN to comply with U.S. tax laws.
  • There is no mention of Resident Aliens being unqualified to receive the $600 emergency increase in unemployment compensation benefits in the CARES Act. In Texas, these individuals (U.S. Residents) apply for this federal emergency increase of $600 with the Texas Workforce Commission at the same time they file an Unemployment claim based on loss of employment as the result of Covid-19. I think Resident Aliens or U.S. Residents qualifies to receive the weekly $600 under the CARES Act.

Attorney’s Concluding Remarks:

This is the end of Legal Thoughts for now!

  • Thanks for giving us the opportunity to inform you about who is a resident alien of the United States under U. S. tax law. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast. Stay tune! We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation, and immigration. Until next time, take care.

Podcast – Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair? | LEGAL THOUGHTS

Published June 29, 2020

Podcast - Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.   The topic of discussion is “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?” You can listen to this podcast by clicking here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or wherever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz, Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and our Immigration Legal Assistant, Reyna Munoz will be reading answers that I previously wrote in response to the questions on this important tax topic: “Liability of Remote Sellers to Collect, Remit and Report Texas Sales Taxes After Wayfair?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

Hello, Good morning Coleman. My name is Mayra Torres, for everyone who hasn’t met me yet, I am the Public Relations Associate at Coleman Jackson, P.C. Umm… todays first question is regarding Wayfair. What Businesses Located Outside of Texas are Required to Collect and Remit Sales Taxes to the State of Texas after Wayfair. Who is “Wayfair”?

Attorney Answers Question 1:

Wayfair refers to a united states supreme court decision decided by the court on June 21, 2018 in a case that is called south Dakota vs Wayfair, Inc. The case involved a sales tax dispute between south Dakota and Wayfair, Inc.

Interviewer:  Mayra Torres, Public Relations Associate

Question 2:

Well what was the dispute about?

Attorney Answers Question 2:

Wayfair, Inc. Was not located in south Dakota and had no physical presence within The state.

Wayfair, Inc. Sold goods from its remote location to customers who lived in South Dakota. The question in this case was: “when can an out-of-state seller be required to Collect and remit sales tax to a state where they have no physical presence.”

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

So, why was that even in doubt that South Dakota could make Wayfair an out-of-state Seller collect taxes on purchases of goods and services by south Dakota Residents?

Attorney Answers Question 3:

  • That is an excellent question. I am going to explain the concerns with respect to States imposing legal duties on out of state residents as it relates to sales Taxation: the issue here is the free flow of interstate commerce!
    1. The constitution of the united states gives congress the power to regulate Commerce in article 1, section 8, clause 3.
    2. The concern of the framers of the constitution was division within the United states where states are fighting among themselves imposing economic Burdens on the free flow of commerce.
    3. The commerce clause limits the states regulation of commerce
  • The U.S. Supreme Court will allow a State tax on Commerce so long as it meets all of these conditions:
    1. The tax applies to an activity with a substantial nexus with the taxing State;
    2. The tax is fairly apportioned;
    3. The tax does not discriminate against interstate commerce; and
    4. The tax is fairly related to the services the State provides.
  • Condition Number 1 is the only one in question in the Wayfair Case: the tax applies to an activity with a substantial nexus with the taxing State:
  • In those states that have a sales tax statute, before Wayfair, sellers had to have a physical presence within a state in order for that state to impose a liability on a merchant to collect sales taxes on purchases of goods and services. That is known as the Quill physical presence test from the U.S. Supreme Court decision in 1992 called Quill Corporation vs. North Dakota.
  • After Wayfair, which involves South Dakota, out-of-state sellers can be held responsible for collection and payment of sales taxes to a state by selling a product or service to customers within the state. The Court said that physical presence in a State can be established merely by selling goods and services to customers in the State. No employees or offices or other physical presence is required in order to establish substantial nexus in the taxing state. So now mere shipping goods and services into a state may bring remote sellers within the scope of out-of-state sales tax statutes. The Supreme Court in Wayfair said that imposing this sales tax collection, remittance and reporting requirement in some circumstances did not violate the Commerce Clause of the United States Constitution, Article 1, Clause 3.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

Okay…. What Texas… Who is a remote seller selling goods and services to people who live in Texas? Are they liable to collect, remit, report, and keep records of Texas taxable sales?

Attorney Answers Question 4:

  1. A remote seller is defined in Texas Tax Code Rule 3.286(a)(4)(l) and (J) as any seller whose only activities in Texas are the remote solicitation of sales, which includes activities such as solicitation by catalogs, flyers, radio, television, telephone or internet.
  2. Sellers outside of Texas who sell goods and services to Texas residents are required to collect, remit and report Texas sales and use tax effective October 1, 2019 if they made total sales of $500,000 into Texas for a prior 12-month period. If the appropriate sales tax is not properly collected the Use tax must be submitted to the Texas Comptroller of Public Accounts.
  3. And yes, remote sellers must keep proper books and records of all Texas taxable sales transactions and have them available for inspection and examination in compliance with 34 Texas Tax Code Section 3.281. The TAC specifically identifies the types of records that all sellers of taxable goods and services must maintain for 4 years.
  4. Texas Comptroller Auditors are permitted to estimate taxable sales in the event a seller fails to maintain and present the required records for inspection at the request of the Texas Comptroller.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

What are the Texas Sales and Use Tax Rate?

Attorney Answers Question 5:

  1. The current sales tax rate is 6.25 percent State rate and each local taxing authority can charge up to 2.0 percent. The maximum allowable sales tax rate in Texas is 8.25 percent.
  2. As for remote sellers, Texas permits them to charge a flat rate of 1.75 percent instead of the local rate which changes from county to county, city to city and school district to school district throughout the State. Remote sellers make this election by filing form 01-799, Remote Seller’s Intent to Elect or Revoke Use of Single Local Use Tax Rate with the Comptroller’s Office. If the remote seller does not make this election, they must compute, collect and remit the local tax based on the local tax applicable to the location to which they shipped the goods or performed the service.

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

So, who administers the Limited Sales, Use and Excise Tax laws in Texas?

Attorney Answers Question 6:

The Texas Comptroller of Public Accounts.

Interviewer:  Mayra Torres, Public Relations Associate

Question 7:

Are all remote sellers required to do this now?

Attorney Answers Question 7:

  • No; these requirements do not apply to all remote sellers.
  • A remote seller whose total Texas revenue from sales into Texas in the preceding 12 calendar months are less than $500,000 is not required to obtain a sales tax permit and they are not required to collect and remit any sales tax to Texas. The sales are computed on gross revenue not net revenue.
  • As of April 1, 2020, remote sellers must combine sales made through all mediums with delivery into Texas to determine whether they must collect, remit and report Texas Sales.

Interviewer:  Mayra Torres, Public Relations Associate

Question 8:

Wow, it seems like a somewhat complex issue.

Attorney Answers Question 8:

  • Yes, we have just a brief outline here of the issues and sales tax laws applicable to remote sellers since the Wayfair decision of the U.S. Supreme Court.
  • Listeners should stay tune and follow our podcast and read our blogs as we might revisit this topic in the future.

Attorney’s Concluding Remarks:

This is end of “legal thoughts” for now!

  • Thanks for giving us the opportunity to inform you about how the Texas Tax Code requires remote sellers to collect, remit and report sales taxes on sales made to Texas residents to the Texas Comptroller. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune! We are here in Dallas, Texas and want to inform, educate, and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.

Podcast – Does unemployment compensation recipients have to pay federal taxes on the money received resulting from Covid-19? | LEGAL THOUGHTS

Published July 14, 2020 Podcast - Does unemployment compensation recipients have to pay federal taxes on the money received resulting from Covid-19? | LEGAL THOUGHTS

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses and agencies from around the world in taxation, litigation and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.

The topic of discussion is “Is Unemployment Compensation Received Taxable Income?” You can listen to this podcast by clicking here:  

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or where ever you may listen to your podcast.

 

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Is Unemployment Compensation Received Taxable Income?”
  • Other members of Coleman Jackson, P.C. are Yulissa Molina, Tax Legal Assistant, Reyna Munoz,Immigration Legal Assistant and Mayra Torres, Public Relations Associate.
  • On this “Legal Thoughts” podcast our Public Relations Associate, Mayra Torres, will be asking the questions and I will be providing the answers to the questions on this important tax topic: Is Unemployment Compensation Received Taxable Income?

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

What are unemployment benefits?

Attorney Answers Question 1:

  • Unemployment benefits generally includes any amount of money received under any federal or state law program designed to protect taxpayers against loss of income caused by involuntary loss of employment or decrease in compensation.

Interviewer:  Mayra Torres, Public Relations Associate

QUESTION 2:

Who is eligible to receive unemployment benefits?

Attorney Answers Question 2:

  • Keep in mind that unemployment benefits, as a general policy, is governed by State and federal labor laws and are designed to replace in whole or part the loss of employee wages due to some involuntary lay off or employment disruption.
  • Unemployment programs are administered by the States and each State has its own rules as to who qualifies and how they should apply. In Texas, the Texas Workforce Commission administers the Texas Unemployment Compensation System.

Interviewer:  Mayra Torres, Public Relations Associate

Question 3:

  • Well okay, I kind of understand. But there is a lot of talk about the CARES Act and something about$600 dollars people are receiving.
  • What is the CARES ACT? Does it affect unemployment benefits… like, who qualifies and how they apply and how much they get and how long they can get unemployment benefits?

Attorney Answers Question 3:

  • Those are excellent questions!
  • The CARES Act was enacted into law on Friday, March 27, 2020. CARES stand for the Corona virus, Aid, Relief, and Economic Security Act. It is a $12, trillion-dollar economic relief package featuring extensive tax provisions. It is Public Law 116-136 (3/27/2020). And yes it does impact who qualifies for unemployment compensation, how they apply and how much they receive it and for how long if their loss income is related to Covid-19.
  • Employees who lost jobs qualify
  • Self-employed individuals qualify under the CARES Act
  • Qualified individuals impacted by Covid-19 must file unemployment claims through the State governmental agency who regulate unemployment benefits in their State. Residence in Texas must file claims with the Texas Workforce Commission and follow all filing requirements and follow-up guidance that TWC requires to obtain their compensation. Keep in mind that TWC rules and requirements may continue to change as the State continues to reopen its economy during this pandemic.

Interviewer:  Mayra Torres, Public Relations Associate

Question 4:

Okay…. And what about undocumented workers and self-employed people; can they file for

unemployment benefits with TWC too?

Attorney Answers Question 4:

Yes, workers and self-employed individuals do not have to be United States citizens or lawful permanent residents to qualify for unemployment. All residence of Texas who had employment prior to the Covid-19 Crisis can file for unemployment.

Interviewer:  Mayra Torres, Public Relations Associate

Question 5:

What about the $600 everybody is talking about; how do unemployed people get that?

Attorney Answers Question 5:

  • The CARES Act not only expanded the eligibility for unemployment to self-employed individuals like I mentioned before; the Act also extended coverage by 13 weeks and provides unemployed individuals with an extra $600 per week of federal assistance on top of the State benefits.
  • Qualified individuals apply for this extra $600 per week federal benefit when they file their State Unemployment Claim. Again, in Texas everything is filed with the Texas Workforce Commission.Contact TWC for help in filing an unemployment claim in Texas. The TWC rules are in flux as the State reopens during this pandemic.

Interviewer:  Mayra Torres, Public Relations Associate

Question 6:

  • Okay, I was just curious; many folks are afraid of going back to work because they might get sick or get their families sick.
  • Can somebody continue to receive unemployment even though their boss tell them that they can come back to work now?

Attorney Answers Question 6:

  • Unemployment benefits are for people who loss their jobs or income due to no fault of their own. People who quit their jobs generally will not qualify for unemployment compensation in Texas. I say generally because facts and circumstances matter. Application of the law can be messy at times because facts matters. Perhaps an unemployed individual can make out a winnable case that it’s too dangerous for them to return to work during the Covid-19 pandemic.
  • But, Keep in mind that people who file initial and continuation claims for benefits with TWC provides self-certification under penalty of perjury that they are otherwise able to work and are available for work under the Texas Labor Code that governs such matters in Texas.
  • The rules concerning this question may change from day to day or week to week as the State of Texas reopens during this pandemic.

Interviewer:  Mayra Torres, Public Relations Associate

Question 7

  • Okay, I understand; it sounds like it just depends on all the facts, and circumstances and State and federal government rules updates.
  • Another BIG QUESTION A LOT OF PEOPLE HAVE IS THIS!
  • Do unemployed individuals have to pay taxes on unemployment benefits that they receive?

Attorney Answers Question 7:

  • The tax treatment of unemployment benefits received depends on the type of program paying the benefits.
  • I am going to try to keep this simple; but folks must understand that the federal and state program funding the compensation can impact whether the amounts received are taxable.
  • I am going to limit my answer to only three types of unemployment benefits that I think are germane to the types of benefits that most people are receiving during this Covid-19 national emergency:
  • Types of Unemployment Benefits that are Taxable
    1. Benefits paid by a State or the District of Columbia from the Federal Unemployment Trust Fund
    2. State Unemployment insurance benefits
    3. Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
  • Conclusion: Most people receiving unemployment due to Covid-19 falls under one of these programs. The benefits are taxable!

Interviewer:  Mayra Torres, Public Relations Associate

Question 8

I think I’m getting it now! What about the extra $600 per week from CARES Act, is it taxable too?

Attorney Answers Question 8:

  • Yes, unemployment compensation received under the CARES Act is taxable because the CARES Act does not specifically exempt the $600 extra unemployment compensation from federal taxation.
  • In fact, the CARES Act states that in the event there is a conflict in the CARES Act with provisions in the Disaster Relief and Emergency Assistance Act of 1974, then the provisions of the Disaster Relief and Emergency Assistance Act of 1974 controls. As we have seen, benefits received under the 1974 Act is taxable.
  • So, the answer to your question is, yes, unless Congress exempts the $600 from federal taxation, it is taxable under Internal Revenue Code Section 85(a).

 Interviewer:  Mayra Torres, Public Relations Associate

Question 9

When does the taxes on that unemployment money have to be paid?

Attorney Answers Question 9:

  • Those filing for unemployment can ask TWC to withhold the appropriate amount of tax from their unemployment compensation. Make this choice by giving TWC Form W-4V, Voluntary Withholding Request; or
  • They may have to file estimated taxes by the 15th day of the end of each quarter. They can compute this amount on Form 1040-ES and make their estimated payments to the IRS by phone,online or by mail.

Interviewer:  Mayra Torres, Public Relations Associate

Question 10

What if people don’t know and never ask TWC to withhold the money and never do this

estimated tax thing?

Attorney Answers Question 10:

  • If taxpayers don’t pay enough taxes during a year, either by withholding or by estimated tax deposits, or some combination of the two, they may have to pay an underpayment penalty.
  • The federal tax system in the United States is a pay-as-you-go self-certification system. But keep in mind, the IRS and the taxpayer will probably receive a Form 1099-G from TWC for all unemployment compensation paid during the course of the calendar year.

 Attorney’s Concluding Remarks:

This is end of Legal Thoughts for now

  • Thanks for giving us the opportunity to inform you about taxation of unemployment compensation. If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Stay tune! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.

 

Podcast – Did Your Families ITINs Expire In 2019? | LEGAL THOUGHTS

Published July 14, 2020

Did Your Families ITINs Expire In 2019

Legal Thoughts is a podcast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses and agencies from around the world in taxation, litigation and immigration legal matters.

This particular episode of Legal Thoughts is a podcast where the Attorney, Coleman Jackson is being interviewed by Mayra Torres, the Public Relations Associate of Coleman Jackson, P.C.

The topic of discussion is “Potentially Over 2 Million ITINs Expired at the End of 2019:  Did your families ITINs expire in 2019.”  You can listen to this podcast here:

You can also listen to this episode and subscribe to Coleman Jackson, P.C.’s Legal Thoughts podcast on Apple Podcast, Google Podcast, Spotify, Cashbox or where ever you may listen to your podcast.

TRANSCRIPT:

ATTORNEY:  Coleman Jackson
Legal Thoughts
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW

ATTORNEY:  Coleman Jackson

Welcome to Tax Thoughts

  • My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
  • Our topic for today is: “Potentially Over 2 Million ITINs Expired at the End of 2019: Did your families ITINs expire in 2019.”
  • On this “Legal Thoughts” podcast our public relations associate, Mayra Torres will be asking the questions and I will be responding to her questions on this important tax topic: “Potentially Over 2 Million ITINs Expired at the End of 2019: Did your families ITINs expire?”

Interviewer:  Mayra Torres, Public Relations Associate

Question 1:

What is an ITIN and who uses an ITIN?

Attorney Answers Question 1:

  1. Individual Taxpayer Identification Numbers or ITINs are used by people who have federal tax filing or federal tax payment obligations under U.S. federal tax law who are not eligible for a Social Security number.
  2. ITINs are used by many Texans who are not authorized to work in the United States because they do not have work authorizations issued by the Department of Homeland Security; therefore, these workers cannot obtain a Social Security number from the Social Security Administration. I point out that an ITIN cannot be used for work authorization purposes; it is solely to be used for tax compliance purposes.
  3. Many undocumented individuals who live and work in the United States use ITINs which are issued by the United States Treasury for tax purposes. Whole families quite often use ITINs to fulfill their tax obligations and many undocumented children also use ITIN’s so that their parents can take the child tax credit, earned income credit and other benefits offered to taxpayers in the Internal Revenue Code.

Interviewer:  Mayra, Public Relations Associate

Question No. 2

  • Oh, I see; thanks for giving me a full answer to my questions.
  • I have a few more questions…: Are ITINs like a Social Security Number; I mean Social Security Numbers issued by the Social Security Administration are assigned to a person for life, right?  How about the ITIN issued by the U.S. Department of Treasury?  Is an ITIN issued to a person for life too?

Attorney Answers Question No. 2

  • Those are extremely good questions, Mayra.
  • A Social Security Number issued to a person by the Social Security Administration is issued to them for life. That means a person receives only one social security number that they use their entire lives.  Most social security numbers are assigned when U.S. citizens are children.  They keep that number for life.
  • No, the ITIN is not issued for the life of the recipient. The U.S. Congress passed a law called “Protecting Americans from Tax Hikes Act of 2015 (PATH Act) which became law on December 18, 2015.
  • The PATH Act modified U.S. Tax law, 26 U.S.C. Section 6109 as it pertains to ITINs in two major ways:
  • Number 1: ITINs that have not been used on a tax return for 3 tax periods expire.  For example, ITINs not used on a tax return in 2014, 2015, or 2016 expired December 31, 2017.  ITINs not used on a tax return for 2015, 2016 or 2017 expired December 31, 2018.  And ITINs not used on a tax return for 2016, 2017, and 2018 expired on December 31, 2019.
  • WARNING: Filing delinquent tax returns are extremely problematic because household ITINs expire by 3 years of none use automatically.  This is a major development regarding ITINs since the PATH Act became law in the United States.
  • Now, let me discuss the second major change to tax law by enactment of the PATH Act:
  • The PATH Act of 2015 authorized the Internal Revenue Service to develop and implement an annual rolling middle digit expiration schedule for all ITINs in circulation.
  • Under this rolling middle digit expiration schedule, the IRS makes an annual announcement listing the middle digits of ITINs which will expire end of that calendar year. This list of expiring ITINs is usually posted on IRS.gov and possibly in financial newspapers.
  • Since publishing the list of expiring ITINs over the years since the PATH Act, the IRS has announced that the following middle digit ITINs would expire if not properly renewed by the holder of the ITIN:
  • All ITINs with middle digits of 70, 71, 72 or 80 expired on December 31, 2017 if not properly renewed.
  • All ITINs with middle digits of 73, 74, 75, 76, 77, 81, or 82 expired on December 31, 2018.
  • All ITINs with middle digits of 83, 84, 85, 86 or 87 expired on December 31, 2019.
  • Let me just say that the IRS announced on October 10, 2019 that these ITINs can be renewed if the holder files a Form W-7 with the proper paperwork. Moreover, the IRS also said that ITINs with middle digits of 70 through 82 that expired in 2016, 2017 and 2018 can also be renewed if the proper paperwork is filed.  So people should understand that they can renew an expired ITIN.

Interviewer:  Mayra, Public Relations Associate

Question 3:

Wow that is a lot!  It’s good to know that ITIN users can renew their expiring and expired ITINs.  So how are ITINs renewed?  I mean what does an ITIN user have to do to renew their ITIN?

Attorney Answers Question No. 3 

  • Those are good questions, Mayra.
  • The ITIN holder should have received an IRS Notice CP-48 alerting them to the fact that their ITIN was about to expire. This notice would have given them detailed instructions as to how to renew their ITIN.  This Notice however could have been sent to the address where they lived at the time they originally applied for their ITIN.
  • If they did not receive the notice and instructions, they can still renew their ITIN by filing IRS Form W-7 and complying with all the instructions listed in the W-7 Instructions.
  • I might add that ITIN users should check all of the ITINs used by the members of their household and renew all the ITINs in the household even though only one or two of them have expired. The renewal can be filed for all ITINs in a household; and what I mean about household, is mom, dad and minor children who all use ITINs because they are not eligible for social security numbers.

Interviewer:  Mayra, Public Relations Associate

Question No. 4:

  • This has been informative. One last question Attorney:
  • What can happen if an ITIN expires and is not timely renewed?

Attorney Answers Question No. 4:

  • Bad things are all but certain to happen:
  • Tax Refunds could very likely to be delayed
  • The family could be denied the child tax credit with all the potential year-after-year tax difficulties that could arise from falsely claiming the child tax credit
  • The earned income credit could be denied with all the potential long term implications from falsely claiming the earned income credit
  • Accuracy Penalties and interest could be assessed by the IRS for filing inaccurate tax returns.
  • To summarize: A taxpayers failing to renew an ITIN could lead to all kinds of difficulties with the Internal Revenue Service’s Exam Unit and Collections division. Taxpayers who use these ITINs must remain vigilant annually and check to see whether any of the ITINs used in their households are set to expire either because of expiration under the 3 year of none use rule or expiration under the IRS rolling middle digit expiration schedule.

Attorney’s Concluding Remarks:

This is the end of Legal Thoughts for now!

  • Thanks for giving us the opportunity to inform you about expiration of ITINs: It’s time to check Your ITINs because they might be expired or expiring soon.  If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C.  Subscribe on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast.  Stay tune!  We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration.  Until next time, take care.

Federal Tax Developments Related to Covid-19

By: Coleman Jackson, Attorney & Certified Public Accountant
March 30, 2020

As you can imagine, things are changing and developing fast and furious during this Covid-19 Pandemic. Developments in taxes are no exception! Our law firm desires to keep our clients and others informed with regards to certain tax developments that might impact their businesses. In keeping with that desire, note some of the most significant recent federal tax developments:

  1. Tax Day now July 15, 2020: The U.S. Treasury and Internal Revenue Service automatically extended from April 15, 2020 to July 15, 2020 the federal income tax filing due date. The IRS gives affected taxpayers until the last day of the Extension Period to file tax returns or make tax payments, including estimated tax payments, that have either an original or extended due date falling within the Period. The IRS will waive any interest and late filing and payment penalties related to these late tax returns.
  2. Small and midsize employers can begin taking advantage of two refundable payroll tax credits designed to immediately and fully reimburse them, dollar of dollar, for the cost of providing Coronavirus-related leave to their employees.
  3. The CARES Act of 2020 enacted in response to Covid-19 provides employers with an employee retention credit in the amount of 50% of their wages impacted by closure due to Covid-19. Further the Act which became law on March 27, 2020 extends the due date for paying employer payroll taxes. Taxpayers must carefully review the law and properly compute the amount of payroll taxes that can be deferred; because it is not 100% deferral of all payroll taxes. Note: The Small Business Administration has announced that they are taking applications for disaster relief from small businesses with respect to loans up to two million dollars for monies borrowed to make payroll and pay rent during this Covid-19 Crisis. The application process and details regarding what businesses qualify and the procedures for applying can be found on the Small Business Administration website. The SBA has announced that they have relaxed some of their processing and documentation requirements to expedite the processing of these emergency loans to small businesses impacted by Covid-19. It appears that these SBA emergency loans could be converted to grants under certain condition(s). The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected Covid-19 taxpayers who need them to apply for benefits or to file amended tax returns claiming casualty losses. Watch our blogs as more changes may be forth coming in the area of employer relief due to Covid-19 closures. But for now, this appears to be the game plan regarding employers.
  4. “Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.” Source: IR-2020-59, March 25, 2020.
  5. The CARES Act eliminates the 10% early withdrawal penalty for Covid-19 related distributions from retirement accounts and make other rule changes regarding retirement account contributions.
  6. The Act relaxes certain corporate and individual charitable contributions rules and provides for an above the line deduction up to $300 for charitable contributions.
  7. Texas has been declared a Presidential Disaster Area related to Covid-19, so more specific rules and provisions could be developed by the IRS related to individuals and businesses with business operations in Texas or impacted by this particular Presidential Disaster Area Declaration.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Thinking About Taxes

By:  Coleman Jackson, Attorney & Certified Public Accountant
March 07, 2020

Thinking About Taxes

Thinking about spending that money withheld from employees’ wages to take a tour of the world, pay other business expenses or house payments?  Don’t do it before reading Internal Revenue Code Section 7702!   Hear those alarm bells ringing!  Anyone required to collect, account for, and turn over to the United States Treasury and willfully fails to carry out this duty are subject to severe civil penalties and upon being found guilty of the felony of failing to collect, account for, and turn over can be fined up to $10,000 and spend up to five years in federal prison.  Payroll tax fraud is a serious crime that is commonly investigated by the IRS Criminal Investigation (CI) Division.  This unit of the IRS investigates all kinds of violations of the Internal Revenue Code.  CI along with the Financial Crimes Network investigates FBAR violations (these are U.S. persons with foreign bank accounts and other foreign assets who fail to timely and accurately disclose these holding on Form 114), money laundering (these are individuals or entities engaged in some kind of unlawful activity and endeavoring to get dirty money into the normal banking system) and other financial crimes.

 

Thinking about not filing that required income tax, gift tax or other federal tax return or providing fraudulent information the IRS?  Don’t do it before reading Internal Revenue Code Sections 7207 and 7203Hear those whistles blowing!  Anyone who intentionally gives false documents, which includes returns and any other written representation to the Internal Revenue Service and any of its employees knowing that its materially false or fraudulent is subject to civil fines and upon being found guilty of the felony of giving the Service false returns or other documents can be fined up to $10,000 (if individual) and up to $50,000 (if corporation), and spend up to one year in federal prison.  Multiples applies in that cumulative false statements, returns and documents can generate multiplication of the civil fines and additional years to the duration of the prison term.

 

Thinking about paying fewer taxes than is lawfully owed by engaging in creative accounting, leaving that or this item off the return while adding and dreaming about things that never happened? Don’t do it before reading Internal Revenue Code Section 7201Hear those gongs clanging! Anyone who intentionally attempts to evade or defeat any tax imposed under the Internal Revenue Code is subject to civil penalties up to $100,000 (if individual) and up to $500,000 (if corporation), and spend up to five years in federal prison upon conviction.

 

Thinking about taxes?  Stay away from the tumbling … lie.


This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432     

How Do You Get Rid of an IRS Tax Lien?

By:  Coleman Jackson, Attorney, Certified Public Accountant
January 29, 2020

How Do You Get Rid of an IRS Tax Lien

When the Internal Revenue Service sends you a tax bill and you do not pay it, a federal tax lien is created by operation of law whether the IRS files the lien in the public property records in your state or not.  A tax lien is merely an enforceable claim that attaches to your property and right to property.  If the IRS files the lien in the public property records, they must under the law inform you of this action.  This is done by a Notice of Federal Tax Lien.

 

IRS levy property

A federal tax lien does not authorize the IRS is take your property.  For this, the IRS must levy your property.  A levy is a lawful process by which the taxing authority can take your property or right to property without the necessity to obtain a court order. Don’t get confused between a lien (notice of tax debt) and a levy (taking of your property).  Taxpayers have a right to appeal both actions in the Office of Appeals and possibly to the U.S. Tax Court if their challenge is timely.For now, the question in this blog is how do you get rid of an IRS tax lien?

 

Taxpayers can get rid of an IRS tax lien

Taxpayers can get rid of an IRS tax lien!  If the tax debt has paid in full, the taxpayer can get rid of the tax lien by seeking a release of the lien.  This is typically an automatic process; but if it’s not, request a release of the lien.  Taxpayers can seek exemption of certain property from the lien.  This is typically done to facilitate the sale or financing of real property or business property with an attached federal tax lien.  Taxpayers can post a bond and ask that the lien be released.  Taxpayers can get rid of a tax lien by filing a challenge in the Office of Appeals as to procedural issues since the IRS must comply with exacting legal rules with respect to filing federal tax liens.  Perfecting an IRS tax lien like any lien is a matter of state law which varies from state to state.   In Texas property law varies from county to county.  This simply means that the IRS must comply with each counties law when filing liens in the county property records.  There are 254 counties in Texas.  In addition to any procedural issues,taxpayers can also get rid of a federal lien by challenging it on substantive legal grounds.  Finally, taxpayers can get rid of an IRS tax lien if the ten-year collections statute has expired unless the collection statute has been extended or suspended by bankruptcy proceedings or for other reasons.  The release of the tax lien is automatic on the expiry of the ten-year collection statute.  This is merely a summary of how to get rid of a tax lien; in law, there are a lot of twist and turns depending upon all the facts and circumstances.

 

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Federal Taxation and Cutting Horses:  It’s Not Just About The Horses

By:  Coleman Jackson, Attorney, Certified Public Accountant
December 16, 2019

Federal Taxation and Cutting Horses: It’s Not Just About The Horses

Recently I came across a United States Tax Court memorandum decision dated November 25, 2019 involving a South Dakota farmer with a cutting horse and seed business.  The issues in the case that struck me were (1) whether the taxpayer’s cutting horse activity was an activity “not engaged in for profit” within the meaning of Section 183 of the Internal Revenue Code, and (2) whether the taxpayer should be required to pay the accuracy-related penalties under Section 6662(a) of the Internal Revenue Code.  The case was Lowell G. Den Besten, Petitioner v. Commissioner of Internal Revenue, Respondent, T.C. Memo 2019-154 (November 25, 2019).  Note that Tax Court Memo decisions cannot be used as precedent by other taxpayers.  So this blogs aim is to pull general observations from the Besten case because federal taxation and cutting horses is not just about the horses.

 

The significant thing for other individuals and businesses who find themselves tangled in a spirited horse race with the IRS is not whether they are in the cutting horse business or whether or not they are in the seed business

The taxpayer won on two of the three issues argued before the U.S. Tax Court.  The significant thing for other individuals and businesses who find themselves tangled in a spirited horse race with the IRS is not whether they are in the cutting horse business or whether or not they are in the seed business.  The significant points of this case are (a) the IRS holds a presumptive correctness in all tax deficiency matters, and (2) the taxpayer always bears the burden to prove that; more likely than not, they are entitled to the deductions claimed on their tax returns.  That means that the taxpayer must always maintain and produce credible substantiation of all items recorded on their tax returns.  This has been operative tax law governing IRS deficiency cases ever since the United States Supreme Court ruled on these two points in a pair of federal tax cases known as Welch v Helvering, 290 U.S. 111, 115 (1933) and New Colonial Ice Co., v. Helvering, 292 U.S. 435, 440 (1934).   Guy Tressillain Helvering, a Democrat from Kansas was the Commissioner of the Internal Revenue of the Bureau of Internal Revenue from 1933 to 1943.  This is the legacy agency of the Internal Revenue Service.  Today, typically tax cases are styled “Taxpayer v. Comm’r”.  Anyway, locks on doors are preparatory.  Folks put locks on their doors to prepare for when the thief comes.  The same way, taxpayer’s must collect, summarize, and maintain substantiation for all deductions claimed on their tax returns in the event the IRS examiner visits.  In the 2019 Besten case, we see the U.S. Tax Court applying the rules established in the 1930s.  In tax law and in law in general, predictability matters; there is little benefit of surprise, duplicity and uncertainty in law.  Taxpayers can prepare and comply with the law if they know the applicable law because federal tax law is not just about the horses.

 

Internal Revenue Code Section 6662 permits the IRS to assess a 20% accuracy penalty on tax deficiencies

Internal Revenue Code Section 6662 permits the IRS to assess a 20% accuracy penalty on tax deficiencies.  The accuracy-related penalties can be imposed by the IRS when tax deficiencies are due to the taxpayer’s negligence, recklessness or willful violations of the federal tax laws. In the Besten case, the taxpayer avoided paying the accuracy-related penalty because he was able to adequately convince the U.S. Tax Court that he acted reasonably and acted in good faith by relying on the professional advice of his tax professional.  This is often a viable defense for the taxpayer who can meet the burden that they (a) relied on the advice of their tax professional, (b) their tax professional was competent and experienced, and (c) they gave their tax professional accurate and complete information and documentation regarding the tax issue. So this particular reasonable cause defense (reliance of the tax professional’s advice and guidance), like the other reasonable cause defenses that might be applicable, depends on all the facts and circumstances because federal taxation and cutting horses is not just about the horses.  Reasonable cause defenses are not automatic relief; but like cutting horses, every reasonable defense should be explored when confronting additional taxes, penalties and interest, because cutting cost is another way of saving money.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432